SMEs ministry lifts startup limits on military service, parental leave

The SMEs ministry said Friday it will extend state support for startup founders who suspend their businesses for military service or childbirth, part of a 10-point package to dismantle regulations that block Koreans from starting companies.

Under the plan presented to the government's regulatory reform committee, founders who take an unavoidable break will keep their eligibility for startup support programs for up to five years beyond the current seven-year limit that defines a startup under the Framework Act on Small and Medium Enterprises. The ministry cited the absence of any exception for such gaps as a hurdle for young and female entrepreneurs.

The ministry also moved to loosen financial requirements that have shut early-stage companies out of government research and development funding. Ventures less than three years old will no longer be screened out in advance for high debt ratios or complete capital erosion; those checks will instead become criteria in the selection review.

Early-stage companies currently face daily transfer limits of 1 million won ($755) at automated teller machines and in electronic banking, and 3 million won ($2,265) at branches. The ministry will standardize the guidelines banks use to decide whether to lift those caps, which vary from lender to lender, and add credible grounds such as a record of selection for a government startup program.

Companies founded through the venture studio model, in which an accelerator holds 50 percent or more of the equity, will be recognized as startups and become eligible for support under the startup law.

For founders who have failed, the sincere-management assessment introduced in 2016 will be reoriented from judging the commercial viability of a technology toward weighing the founder's effort to recover, and the restart exceptions will be applied across all ministry programs before being extended to other government departments.

The ministry plans to revise the enforcement decree of the startup support act so that certain cases now excluded — adding a different sole proprietorship while already running one, or an executive of an existing corporation founding a company alone with more than 50 percent of the shares — count as a startup.

The changes were discussed at the second full meeting of the regulatory reform committee. The ministry said Korea ranks within the global top 20 for its overall startup ecosystem but 32nd for its business environment, including regulations and administrative procedures, and that startups short of staff and regulatory information struggle to cope.

To keep the effort going, the ministry will create a startup and venture regulatory innovation committee under the reform committee, with private experts and related government bodies taking part, and will identify burdens through a regulatory innovation network of private organizations and screening under its startup project.

The ministry will also raise the number of investment institution types whose funding can qualify a company for venture certification to 23 from 21, with asset managers to be considered in stages, and will standardize the documents required for technology-based listings so that companies rated by two specialist agencies submit common forms.